Academic journal article Journal of Managerial Issues

Working with Dealers in India

Academic journal article Journal of Managerial Issues

Working with Dealers in India

Article excerpt

U.S. participation in the Caribbean Basin Initiative, the European Lome Convention and ongoing support of the North American Free Trade Agreement (NAFTA) is solid evidence that greater trade with developing nations is a key objective of U.S. trade policy. With the enormous trade deficit of the United States, opportunities to cultivate healthy trade relations with developing nations are among the most attractive possible actions that U.S. firms can pursue. A major obstacle in the cultivation of market opportunities in developing countries is a shortage of established wholesale and retail businesses. Firms that want to enter these markets are often forced to invest heavily in the development of local entrepreneurs to create an infrastructure through which trade can flow (Czinkota and Ronkainen, 1993; Moore, 1993). Heavy investments in facilities and training of newly recruited foreign distributors are common.

The Indian market is particularly attractive to multinational marketers. There are more than 150 million middle-class consumers who belong to well educated families with salaries in excess of $4,000 a year in local purchasing power. A sustained taste for foreign consumer durables begins at an annual income of only $2,000 in India (The Economist, 1994). This makes India's market potential greater than that of many countries in Western Europe. The potential for rapid market growth in India is staggering. Coca Cola, for example, need only raise the Indian per capita consumption of its product to 30 percent of its U.S. level to create a company as large as Coke USA is today (Moore, 1993).

The Indian government in recent years has dramatically altered key policies and is now allowing foreign companies to be majority stockholders in Indian ventures. During the 1970s, foreign equity ownership in Indian ventures was restricted by law to a maximum of 49 percent. IBM and Coca Cola were among many foreign corporations doing business in India that elected to leave that market rather than give up full ownership of their operations. In a series of moves during the 1980s, the restrictions were gradually eased and it was made easier for foreign firms to repatriate assets and profits earned in India. Recent financial reforms allow full convertibility of the Indian currency for international trade and many import license requirements for industrial products have been scrapped. IBM, Coke and numerous other western firms have returned to India. Many other American firms (e.g., PepsiCo, McDonalds, Ford, AT&T, and General Electric) have invested heavily in the Indian market recently. Foreign direct investment in India now approaches $4 billion (Bensky et al., 1993) and continues to grow rapidly.

The growth of the Indian economy and the entry by foreign marketers is likely to result in the recruitment of many new dealers and distributors, many of whom will be small-scale entrepreneurs. Entering western firms will have to build and support those entrepreneurs. Many western firms have entered growing foreign markets with a business orientation and philosophy which treated foreign distributors as independents and not partners. Like Coke (Moore, 1993), some found themselves at the mercy of local distributors who did not share common goals and philosophies. The development of effective communication strategies to manage relationships with local distributors is one of the greater problems faced by Western firms that are new entrants to the Indian market.

In this study we examined how supplier communication patterns with newly recruited dealers differ from those with relatively more established dealers. While the recruitment of distributors will be vital to foreign market expansion, Indian distributors will probably have to be managed with somewhat different communication strategies than are appropriate in the west. This paper also details how supplier-dealer communication patterns and dealer perceptions of the strength of their relationship (relationalism) with a supplier affects dealer satisfaction. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.